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What is Square Inch Analysis in Direct Marketing?
Square inch analysis is a method used by direct marketers to determine the relative profitability of products displayed in mail order/direct marketing catalogs. Once this analysis is done it becomes easier for direct marketers to assign positions to each product, corresponding to their performance, to get the optimum results from their direct marketing campaigns.
Catalog spaces isn’t free and direct marketers need to determine which products are paying more for their space and which are paying less. After the square inch analysis is done, high paying products can be allocated premium positions and low paying ones can be moved down the order, or even eliminated from the list.
To conduct a proper square inch analysis one must have all the data related to catalog space and sales and profit figures for each product displayed in the catalog. These include:
- Page dimensions
- Number of pages in the catalog
- Space occupied by each product
- Unit sales volume
- Gross revenue of each product
- Gross profit of each product
- Number of product categories
Steps Involved in Effective Square Inch Analysis
- Determine how much space each product takes up on a catalog page. This includes both product image and text description.
- Determine all the space occupied by other text matter and white space on the page. Allocate this space proportionately to all the products on the page. After allocation, you will have total square inches used by each product. Enter this in one column in a spreadsheet.
- In the second column put the sales for each product.
- Next, divide the sales of each product by the total inches it takes up on the page (as calculated in step 2). This will give you sales per inch for each product. You can go further and also find out profit per inch.
- In the last step, to get a better understanding, you can create a sales (or profit) per square in index. To do this, divide the sales-per-inch of the product with the average sales-per-inch of the entire catalog. Depending on what the index is (1, less than 1, or more than 1) you can determine if that particular item is below par, above par or at par in terms of sales and profits.
Goal of Square Inch Analysis
A properly done square inch analysis allows direct marketers to do these 3 things:
- Reduce all products in the catalog to a single common denominator – square inches of space occupied.
- Accurately compare the sales per product and the costs incurred in the space that product occupies in the catalog.
- Rank all the products in terms of sales per inch
Thus, square inch analysis is an effective tool in the hands of direct marketers to improve the effectiveness of the product placement in their catalogs.